Microsoft Reorganization Official, Splits Xbox One OS And Hardware

As we suspected earlier this morning, Microsoft has made its reorganization official. CEO Steve Ballmer has sent an email to staff titled "One Microsoft," in which he details the new way the business will be operated.

The company will be organized into a number of divisions: Engineering, Marketing, Business Development and Evangelism, Advanced Strategy and Research, Finance, HR, Legal, and Operations. Within engineering (the home of Xbox One), there will be four units: Operating Systems, Applications and Services, Cloud and Enterprise, and Devices and Studios.

Ballmer's vision for a monolithic Microsoft has significant implications for the Xbox One creation, which is now split in half. Terry Myerson, formerly head of Windows Phone, will head the Operating System unit, which includes the Xbox One's core functions. Following Don Mattrick's departure, Julie Larson-Green is now in charge of hardware (Devices and Studios), which includes the Xbox One's tangible components. Additionally, this new organization puts Skype head Tony Bates in charge of developer relations and evangelism, which could have impact for the Xbox One on the post-launch software side.

Ballmer's email stresses collaboration as a key focus of the reorganization. "Improving our performance has three big dimensions: focusing the whole company on a single strategy, improving our capability in all disciplines and engineering/technology areas, and working together with more collaboration and agility around our common goals," Ballmer told employees. For those intently watching the Xbox One's communication issues, one passage might offer some hope. "We will reshape how we interact with our customers, developers and key innovation partners, delivering a more coherent message and family of product offerings," Ballmer offers.

Other implications include a path toward a new financial reporting structure that will no longer break out different business units. This would make it much harder for investors to discern what products are underperforming. As with any change in financial reporting, comparison becomes difficult in the periods immediately following a shift.

Microsoft will be holding a town hall meeting at 10 am Pacific for employees. We've reached out to the company for comment. The full transcript of Ballmer's email to staff can be found here.

Our TakeI am skeptical about how this will help the Xbox One get back on its feet. The reorganization might be good for Microsoft as a whole, but splitting the finalization of the Xbox One across two engineering divisions with two different, new leaders seems ill advised. Once the console is launched, Myerson's group will be responsible for refining the user experience, which likely won't require the same level of interactivity with the hardware team.

We're eager to hear from Larson-Green about her plans for the Xbox One launch, how she'll be using existing staff like Phil Spencer, and how she and Myerson will navigate the launch with two separate divisions handling crucial functions.